Tate & Lyle upgraded by SocGen as downgrade cycle nears end

30th Jul 2015 14:42

(ShareCast News) - Societe Generale upgraded Tate & Lyle to 'buy' from 'hold' and raised the price target to 620p from 600p.The bank said that with 2016 earnings per share estimates now half the level of where they stood only two years ago, we may be getting close to the end of the long-running earnings downgrade cycle."With a 5% prospective yield and some painful decisions to de-risk the business behind it, the outlook looks both reasonable and rebased to us."It said the company's first-quarter trading statement was "reassuringly dull" and the outlook was in line with expectations.SocGen said the dividend of 28p is clearly a share price support and gives a yield of around 5%.It said Tate's balance sheet is relatively strong and the company will receive £200m from the European bulk disposal so there is little funding risk, especially as the chief executive indicated that capex requirements should materially reduce in full-year 2017.Given better visibility on the Speciality Food Ingredients business, SocGen now values the stock on a 15% price-to-earnings discount to the European food ingredient peer group average. With a 5% prospective yield, this gives a total shareholder return of 19%.At 1349BST , shares were down 0.9% at 539.50p.